Using voting rights to address ESG crises

ShareAction’s fourth edition of Voting Matters shares the findings of how 68 asset managers voted on 252 ESG shareholder resolutions in 2022. The report reveals that 49 additional resolutions around ESG issues would have won majority support if BlackRock, Vanguard and State Street had voted for them. These issues include securing paid sick leave for all 270,000 global employees at TJX department stores (owner of TK Maxx in the UK), disclosures from Amazon on how it is protecting employee freedom of association (including their right to unionise); and encouraging energy companies to set targets for greenhouse gas emissions in alignment with the net zero goals of the Paris Agreement. So why is this surprising?

The gap between public commitments and voting performance

Crucially, the report found that the four largest asset managers in the world voted for significantly fewer climate and social resolutions than they did in 2021. Though global votes for environmental and social resolutions increased from 60 per cent in 2021 to 66 per cent in 2022, significant increases were only seen in Europe while support from asset managers in the US and UK remains stagnant.

Claudia Gray, Head of Financial Sector Research at ShareAction said: “Most of the world’s largest asset managers are not consistently using their voting rights to address the multiple environmental and social crises the world is facing.

“Asset managers must strengthen their voting policies, ideally through a commitment to ‘comply or explain’, meaning default support for resolutions with positive environmental and social impacts, and issuing a public explanation when votes are not cast in favour.

“Policymakers must also step up in legislating to enhance proxy voting transparency and improve accountability for asset managers whose track record on voting is at odds with their sustainability claims.”

A more conservative approach

The report found that BlackRock, Vanguard, Fidelity Investments and State Street supported an average 20 percent of resolutions, compared to 32 per cent in 2021. Each voted more conservatively than the world’s largest proxy voting advisors Institutional Shareholder Services (ISS) and Glass Lewis.

Despite being members of the world’s largest investor initiative on climate change, Climate Action 100+ (CA100+) asset managers only supported two-thirds of all climate resolutions in a sample set. Similarly, those belonging to the Net Zero Asset Managers Initiative (NZAMi) showed just slight improvement with 63 per cent support for similar decisions; leading one to question whether efforts made by these initiatives are truly helping drive decisive action towards addressing global climatic issues.

Europe steps ahead

Distinct regional differences in voting behaviour were revealed this year; European asset managers expressed increased backing for proposals with an average 81% approval rate in 2022 compared to 69% last year. In contrast, US and UK based companies experienced only a marginal improvement at 1%.

This could be driven by diverging client expectations about climate issues, or due to lack of mandatory reporting requirements outside Europe – suggesting further regulation is needed across other jurisdictions for greater alignment between international investing practices.

Harness proxy voting for driving positive change

Mitigate risk and prepare for tightening legislation by hosting proxy voting within a central, efficient and transparent ecosystem. SI Engage seamlessly integrates engagement data with voting data, enabling you to provide investors with a more complete picture and chronology of committed activity.

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